Wilson v. Commercial Finance Co.

Annotate this Case

79 S.E.2d 908 (1954)

239 N.C. 349

WILSON v. COMMERCIAL FINANCE CO. et al.

No. 749.

Supreme Court of North Carolina.

January 29, 1954.

*912 John D. Slawter and Womble, Carlyle, Martin & Sandridge, Winston-Salem, for plaintiff Eugene H. Wilson, appellee.

William S. Mitchell, Winston-Salem, for defendant Commercial Finance Co., appellant.

ERVIN, Justice.

The defendant insists initially that it is entitled to a reversal of the judgment because all of the testimony disproves the plaintiff's claim. The defendant advances these four independent and successive arguments to sustain this position:

1. The entire evidence compels the single conclusion that the plaintiff, acting through his agent, accepted Bush's check as absolute payment of the purchase price of the Chrysler, and that in consequence the ownership as well as the possession of the automobile passed to Bush at the time of its delivery to him.

2. The entire evidence compels the single conclusion that the plaintiff waived the immediate cash payment of the purchase price of the Chrysler by his conduct after learning of the dishonor of Bush's check, and in that way permitted the title to the automobile to pass to Bush, even if the contract between the plaintiff's agent and Bush did contemplate a cash sale of the Chrysler, and even if the plaintiff's agent did originally take Bush's check as a mere conditional payment of its purchase price.

3. The entire evidence compels the single conclusion that the defendant took its chattel mortgage on the Chrysler from Bush in good faith, for value, and without notice of the plaintiff's claim, and that in consequence it is entitled to be treated as a bona fide purchaser and as such protected against the claim.

4. The entire evidence compels the single conclusion that the plaintiff entrusted the possession of his Chrysler to Bush; that the plaintiff also invested Bush with *913 an indicium of title to the Chrysler, namely, its registration card; that the defendant took its chattel mortgage on the Chrysler from Bush for value in reliance on Bush's possession of the Chrysler and its registration card; and that in consequence the plaintiff is estopped to claim ownership of the Chrysler as against the defendant.

In passing on this phase of the appeal, we must read the testimony in the light of the relevant rules of law. These rules are stated in the numbered paragraphs which immediately follow.

1. A cash sale is one in which the title to the property and the purchase price pass simultaneously, and the title remains in the seller until the purchase price is paid, even though possession of the property is delivered to the buyer. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Little v. Fleishman, 177 N.C. 21, 98 S.E. 455; Davidson v. Diamond Furniture Co., 176 N.C. 569, 97 S.E. 480; Hughes v. Knott, 138 N.C. 105, 50 S.E. 586; Williston on Contracts (Rev.Ed.), §§ 730-733; 77 C.J.S., Sales, § 262. See, also, in this connection: Grandy v. Small, 48 N.C. 8; Grandy v. McCleese, 47 N.C. 142.

2. The seller may waive his contractual right to the immediate cash payment of the purchase price in a sale for cash and permit the title to pass to the buyer before the payment of the purchase price is made by language or conduct manifesting an intention on his part to abandon or relinquish his contractual right rather than to insist upon it. 46 Am.Jur., Sales, § 446; 77 C.J.S., Sales, §§ 232, 262; 67 C.J., Waiver, § 6. See, also, in this connection: H. M. Wade Manufacturing Co. v. Lefkowitz, 204 N.C. 449, 168 S.E. 517; Murphy v. Lafayette Mutual Life Insurance Co., 167 N.C. 334, 83 S.E. 461. But he does not waive his contractual right by taking a check, which subsequently proves to be worthless, in payment for the property sold for cash. Johnson v. Iankovetz, 57 Or. 24, 102 P. 799, 110 P. 398, 29 L.R.A., N.S., 709.

3. In the absence of an agreement to the contrary, the delivery and acceptance of a check does not constitute payment of the item covered by it until the check itself is paid by the bank on which it is drawn. South v. Sisk, 205 N.C. 655, 172 S.E. 193; Andrews-Cooper Lumber Co. v. Hayworth, 205 N.C. 585, 172 S.E. 194; Raines v. Grantham, 205 N.C. 340, 171 S.E. 360; Moore & Dawson v. Highway Engineering & Construction Co., N.C. 142, 144 S.E. 692; Dewey v. Margolis & Brooks, 195 N. C. 307, 142 S.E. 22; Hayworth v. Philadelphia Life Insurance Co., 190 N.C. 757, 130 S.E. 612; Commercial Casualty Ins. Co. v. Durham County, 190 N.C. 58, 128 S.E. 469; Graham v. Proctorville Warehouse, 189 N.C. 533, 127 S.E. 540; Federal Land Bank v. Barrow, 189 N.C. 303, 127 S.E. 3; Thomas v. Prudential Ins. Co. of America, 4 Cir., 104 F.2d 480. It necessarily follows that where the seller contracts to sell a chattel to the buyer for cash, and the seller accepts a check from the buyer as a means of payment of the cash and delivers the chattel to the buyer in the belief that the check is good and will be paid on presentation, no title whatever passes from the seller to the buyer until the check is paid; and the seller may reclaim the chattel from the buyer in case the check is not paid on due presentation. Weddington v. Boshamer, 237 N.C. 556, 75 S.E.2d 530; Parker v. First Citizens Bank & Trust Co., 229 N.C. 527, 50 S.E.2d 304; 28 N.C.L.Rev. 132-137.

4. Even a bona fide purchaser of a chattel acquires no property right in it at common law or in equity as against the true owner, if it is sold by a third person who, although in possession, has no title to it, unless the true owner authorizes or ratifies the sale, or is precluded by his own conduct from denying the third party's authority to make it. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Ellison v. Hunsinger, 237 N.C. 619, 75 S.E.2d 884; Handley Motor Co. v. Wood, 237 N.C. 318, 75 S.E.2d 312; Green River Land Co. v. Bostic, 168 N.C. 99, 83 S.E. 747; Lance v. Butler, 135 N.C. 419, 47 S.E. 488; Millhiser v. Erdman, 98 N.C. 292, 3 S.E. 521; *914 Belcher v. Grimsley, 88 N.C. 88; 56 Am. Jur., Sales, § 464; 77 C.J.S., Sales, § 295.

5. "In determining what protection is afforded to a bona fide purchaser of goods obtained by fraud, the nature and effect of the fraud practiced, rather than the mere presence or existence of fraud, are controlling." 77 C.J.S., Sales, § 294. This is true because in the absence of an estoppel, one is not entitled to protection as a bona fide purchaser unless he holds the legal title to the property in dispute. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Williams v. Lewis, 158 N.C. 571, 74 S.E. 17; Durant v. Crowell, 97 N.C. 367, 2 S.E. 541; Wharton v. Moore, 84 N. C. 479; Winborn v. Gorrell, 38 N.C. 117, 40 Am.Dec. 456; Polk v. Gallant, 22 N.C. 395, 34 Am.Dec. 410; Jones v. Zollicoffer, 4 N.C. 645, 7 Am.Dec. 708; 46 Am.Jur., Sales, § 464; 77 C.J.S., Sales, § 288. As a consequence, an owner who is induced by the fraud of the buyer to part with the possession of his chattel, and no more, can reclaim it from a bona fide purchaser from or under the fraudulent buyer, unless the bona fide purchaser can bring himself within the protection of some principle of estoppel. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Ellison v. Hunsinger, supra; Handley Motor Co. v. Wood, 237 N.C. 318, 75 S.E.2d 312; 42 Am.Jur., Sales, § 470; 77 C.J.S., Sales, § 294. But an owner who is induced by the fraud of the buyer to part with the legal title to his chattel cannot recover if from a bona fide purchaser from or under the fraudulent buyer. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Thomas E. Hogan, Inc., v. Berman, 310 Mass. 259, 37 N.E.2d 742; Williston on Contracts (Rev.Ed.,) § 1531; 46 Am.Jur., Sales, § 471; 77 C.J.S., Sales, § 294; Restatement of the Law of Restitution, § 13. See, also, in this connection this decision: Norfolk Southern R. Co. v. Barnes, 104 N.C. 25, 10 S.E. 83, 5 L.R.A. 611. A mortgagee may occupy the status of a bona fide purchaser within the purview of these rules. "Accordingly, it is well established that, where a sale of personal property is induced by fraud, and the fraudulent purchaser mortgages the property to one who takes without notice of the fraud, and for a present consideration, the mortgagee occupies the position of a bona fide purchaser, and will be protected against the claim of the defrauded seller to the extent of the mortgage debt. * * * Where, however, title to the property did not pass to the mortgagor, the mortgagee does not occupy the position of a bona fide purchaser and will not be protected against the claim of the rightful owner, at least where the owner has not clothed the mortgagor with the indicia of ownership to the extent of estopping him as against a mortgagee of the one in possession." 14 C.J.S., Chattel Mortgages, § 307.

6. A conflict of authority exists in the several jurisdictions whose courts have had occasion to make direct pronouncement on the subject as to whether the seller can reclaim a chattel from a bona fide purchaser from or under the buyer where the seller delivers the chattel to the buyer under an agreement for a cash sale and takes from the buyer for the cash payment a check which afterwards proves to be worthless. "The first line of authority declares that, nothing else appearing, where a chattel is sold for cash, and a check is tendered as the cash payment, and the seller delivers the chattel to the buyer, no title whatever passes from the seller to the buyer until the check is paid or honored; and that in the absence of some estoppel on his part, the seller can reclaim the chattel from a bona fide purchaser from or under the buyer, or from a subsequent purchaser from or under such bona fide purchaser, in case the check is not paid or honored on due presentation. * * * The second line of authority holds that, nothing else appearing, where the parties bargain for the cash sale of a chattel which the seller delivers to the buyer, and payment of the purchase price is made by a check which afterwards proves to be worthless, a voidable legal title passes from the seller to the buyer; and that in consequence a bona fide purchaser acquires an indefeasible title to the chattel if he purchases it from or under the buyer before his voidable title is avoided by the seller." *915 Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391, 397.

7. Pursuant to the rules which prevail in the legal field known as the conflict of laws, this court has applied the first line of authority to transactions occurring in Pennsylvania, South Carolina, and the District of Columbia. Handley Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391; Ellison v. Hunsinger, supra; Handley Motor Co. v. Wood, 237 N.C. 318, 75 S.E.2d 312. It has apparently had no occasion, however, to make a ruling in a worthless check case arising in North Carolina in which the seller undertook to reclaim a chattel from a bona fide purchaser from or under the buyer. 28 N.C.L.Rev. 135. But this court has adhered without variableness or shadow of turning to the rule that on a cash sale of personal property the legal title remains in the seller until the purchase price is paid, even though the seller accepts a check from the buyer as a means of payment of the cash and delivers the property to the buyer. This being true, North Carolina necessarily belongs among the jurisdictions where the first line of authorities obtains.

8. The possession of a chattel is not of itself an indicium of authority on the part of its possessor to sell or incumber it. Consequently the true owner of a chattel is not estopped to deny the authority of its possessor to sell or incumber it merely because he entrusted its possessor with its possession. But where the true owner entrusts the possession of his chattel to another and at the same time invests such other with the indicia of title to it, he is estopped to claim ownership of the chattel as against an innocent purchaser or incumbrancer who pays value or loans money to the possessor in reliance on the indicia of title. Hawkins v. M. & J. Finance Corp., 238 N.C. 174, 77 S.E.2d 669; Handley Motor Co. v. Wood, 237 N.C. 318, 75 S.E.2d 312; Ellison v. Hunsinger, supra; American Exchange Nat. Bank v. Winder, 198 N.C. 18, 150 S.E. 489; 46 Am.Jur., Sales, Sections 460, 463; 77 C.J.S., Sales, § 295.

When the evidence is interpreted favorably to plaintiff in the light of these rules, it makes out this case:

The plaintiff contracted to sell his Chrysler automobile to Bush for cash. Thus the payment of the purchase price in cash and the passing of the title were concurrent conditions. When he accepted the check from Bush as a means of payment of the purchase price in cash, and delivered his Chrysler automobile to Bush, the plaintiff parted with the possession of his Chrysler car, and no more. As the check proved to be worthless on its due presentation to the drawee bank for payment, no title, either valid or voidable, passed from the plaintiff to Bush under the terms of their contract. The plaintiff did not waive his contractual right to the cash payment of the purchase price by his conduct after learning of the dishonor of the check. All he did was to insist that Bush comply with his contractual obligation and make immediate payment. Since no title, either valid or voidable, passed from the plaintiff to him, Bush did not confer upon the defendant by his chattel mortgage any right whatever as against the plaintiff, even if the defendant's assumption that it took the mortgage in good faith, for value, and without notice be valid. Although he entrusted the possession of the Chrysler automobile to Bush, the plaintiff did not invest Bush with any indicium of title to it. This is true because the plaintiff retained his Virginia certificate of title, and under the law of Virginia the sole evidence of the ownership of a motor vehicle is the registered title as exemplified in the certificate of title. Virginia Code 1950, §§ 46-49 to 46-87; Staunton Industrial Loan Corp. v. Wilson, 4 Cir., 190 F.2d 706; Sauls v. Thomas Andrews & Co., 163 Va. 407, 175 S.E. 760; Thomas v. Mullins, 153 Va. 383, 149 S.E. 494; Holt Motors v. Casto, W.Va.1951, 67 S.E.2d 432. The doctrine of estoppel would avail the defendant nothing on the present record even if we should ignore the law of Virginia and accept as valid the defendant's thesis that the plaintiff's registration card constituted an indicium of *916 title to the Chrysler car. Since the notice of transfer form on the reverse side of the card was blank and unsigned, the registration card indicated that the plaintiff and not Bush owned the vehicle.

In leaving this phase of the appeal, we note that the burden of proof on the issue of estoppel rested on the defendant, and that the plaintiff did not introduce any evidence tending to show that the defendant took the chattel mortgage on the faith of Bush's possession of the plaintiff's registration card. Aldridge Motors, Inc., v. Alexander, 217 N.C. 750, 9 S.E.2d 469. The jury rejected the defendant's evidence to that effect.

The defendant contends secondarily that it is entitled to a new trial because the trial judge erred in admitting evidence offered by the plaintiff; in permitting counsel for the plaintiff to argue to the jury that the defendant attempted to practice a fraud upon the plaintiff; and in stating one of the plaintiff's contentions to the jury.

The defendant noted two objections to the admission of the plaintiff's evidence that he held a colloquy with Bush by long distance telephone while Bush was at the office of the defendant. The defendant waived these objections, however, by allowing the plaintiff to give substantially the same testimony without objection in other portions of his examination. Hunt v. Wooten, 238 N.C. 42, 76 S.E.2d 326; Powell v. Daniel, 236 N.C. 489, 73 S.E.2d 143; Lipe v. Guilford Nat. Bank, 236 N.C. 328, 72 S.E.2d 759; Spivey v. Newman, 232 N.C. 281, 59 S.E.2d 844. We are unable to see how the defendant can justly complain of the receipt of the plaintiff's evidence that his Virginia certificate of title was "the title" to his car. The plaintiff was merely identifying the document preparatory to its introduction in evidence. He was not testifying to its contents or legal effect. 32 C.J.S., Evidence, § 625. The trial judge did not err in permitting the plaintiff to testify to facts tending to show that at Bush's instance he caused a sight draft to be drawn on the defendant for the amount of the purchase price of the Chrysler automobile, and to be forwarded to a Winston-Salem bank for collection with the Virginia certificate of title bearing his assignment to Bush attached. The trial judge did not err, moreover, in admitting the sight draft in evidence. This testimony had a logical tendency to reveal the state of mind of the plaintiff after he learned of the nonpayment of Bush's check, and to refute the allegation of the defendant that he intentionally abandoned or relinquished his contractual right to the payment of the purchase price as a condition concurrent with the passing of title. Woodard v. Mordecai, 234 N.C. 463, 67 S.E.2d 639; State v. Black, 230 N.C. 448, 53 S.E.2d 443; State v. Mull, 196 N.C. 351, 145 S.E. 677. Since there was evidence at the trial tending to show that Bush was largely indebted to the defendant at the time Bush received the possession of the Chrysler car, that the defendant took a chattel mortgage from Bush on the Chrysler car immediately after its receipt by Bush, that the defendant compelled Bush to apply the major portion of the sum allegedly secured by the chattel mortgage on the Chrysler car to his preexisting indebtedness to it, and that the defendant falsely denied its possession of the Chrysler car when the plaintiff sought information as to its whereabouts preparatory to reclaiming it after the disappearance of Bush, we are constrained to hold that counsel for the plaintiff did not exceed the bounds of propriety in arguing to the jury that the defendant attempted to practice a fraud upon the plaintiff. 64 C.J., Trial, § 268. The trial judge did not err in his statement of the contention of the plaintiff. The contention had legitimate support in testimony. Moreover, the exception to its statement was noted for the first time in the case on appeal. Powell v. Daniel, supra; State v. Lambe, 232 N.C. 570, 61 S.E.2d 608.

Since no error in matter of law or legal inference appears, the judgment will be sustained.

No error.